Money Find/Feedback/Site Index
May 19, 2000

Indian Tax
Mutual Funds
Personal Finance
Personal Banking
Real Estate

E-Mail this report to a friend
Devangshu Datta

The gains for government will be immense

I don't know how much information technology (IT) users, consumers and industry will benefit from the passage of the IT Bill. But the gains for government will be immense. In 48 hours, the government has opened up new channels for both official and unofficial revenue generation. Without however, promising anything in terms of better infrastructural support, or conceding anything in the form of expectations of better governance.

Much has been written previously about the powers granted to the police under Chapter XIII, including a previous column (see Y2K and the Police Bug), so I will not repeat myself. Let us concede for the sake of argument and in direct contradiction to all the names on the Central Vigilance Commission lists, that there are no corrupt government officials above the rank of DCP rubbing their hands with glee at their newfound ability to extort money. Let us even concede that India will soon develop a new breed of cyberpolice, who will be individually and collectively infallible in the sniffing out and snuffing out cybercrime even before it is committed and will not, in the process, harass innocent souls.

We are still left with a whole host of omissions, exemptions and strange provisions in the IT Bill that negate the purpose of legislation as an enabling device. It is being said that the Act, which lays down such an elaborate system for creating and recognising electronic records, and digital signatures, will automatically lead to greater transparency in bureaucratic operations and a new age of e-governance. It will also result in an explosion of e-commerce opportunities with business-to-consumer (B-to-C) and business-to-business (B-to-B) both growing at warp speed.

That is doubtful. When it comes to facilitating e-governance and introducing transparency in the bureaucratic approach, the IT Act ensures that the bureaucracy will not be disintermediated despite Chandrababu Naidu's earlier heroic attempts, which it may be noted occurred in a legal vacuum and ran into stubborn resistance.

Look at clause 9 of the IT Act. This states that, "Nothing contained in sections 6, 7 and 8 shall confer a right upon any person to insist that any Ministry or Department of the Central Government or the State Government or any authority or body established by or under any law or controlled or funded by the Central or State Government should accept, issue, create, retain, preserve any document in the form of electronic records or effect any monetary transaction in the electronic form."

In simple English, it means that if the government or any arm of it doesn't want to, it reserves the right to insist that all interactions continue to occur in bad, old "meatspace". The government is not obliged to give you information via electronic media, or to accept either payment or applications through electronic media.

You will still line up in front of a babu who will demand plain paper applications in triplicate. These will still be counter-signed and stamped only on the payment of a small consideration. You will also still queue up in a grey government building with pan-spattered walls and beg for information that is supposedly in public domain. You will even continue to queue up to pay bills. There is no commitment whatsoever that the government will make a push to move towards a paperless environment. So don't expect interactions with the government to get either less painful or less expensive. The babu-neta nexus stays firmly in charge of its franchise.

Another set of exemptions from the Act will knock other business expectations out of kilter. Look at Clause 1) subsection (4), which deals with exemptions.
This states that "Nothing in this Act shall apply to:
(a) a negotiable instrument as defined in section 13 of the Negotiable Instruments Act, 1881;
(b) a power-of-attorney as defined in section 1 A of the Powers-of-Attorney Act,1882;
(c) a trust as defined in section 3 of the Indian Trusts Act, 1882;
(d) a will as defined in clause (h) of section 2 of the Indian Succession Act, 1925 including any other testamentary disposition by whatever name called;
(e) any contract for the sale or conveyance of immovable property or any interest in such property;
(f) any such class of documents or transactions as may be notified by the Central Government in the Official Gazette."

Coming to the sub-sub-clauses one by one, 1(4)(a) suggests that online cheques will not be recognised by the Act. This leaves an enormous grey area when it comes to making payments online and impacts on the banking initiative taken by HDFC Bank and ICICI Bank, for example. Presumably, this is to induce all online transactions to move through the system of digi-sign certification, wherein, it may be noted, a certain sum of money not exceeding Rs 25,000 will be charged for a digital signature certification.

The bit relating to a power of attorney means that you will still have to use Fedex or UPS, rather than Rediffmail, to obtain your brother's power-of-attorney if he is posted in Washington and you manage his affairs in Delhi. You will just have to live with the inevitable delays and additional expenses this causes. Since powers of attorney are usually given when the principal cannot be physically present, it seems a strange exemption. However, it is cheaper to courier documents to and fro, than it is to pay Rs 25,000 for certified electronic documentation. So you don't lose too much - the Act alters nothing.

Why one cannot set up a trust online is a matter of puzzlement. After all, the Net is supposed to be the ultimate haven of communities and special interest groups. Given that, it would be nice to pull in friends and believers in a given cause, no matter if they are all remotely located. Perhaps, this exemption is a hangover from the territorial bias of all previous laws. A trust had to be located somewhere it could be physically investigated.

Not allowing a will online or releasing certain classes of official documents, both, make sense. The exemption of certain classes of documents are presumably justified by the security aspect, although one would have thought that clause 9 adequately covered this anyway. Not allowing the registering of an electronic will is presumably to avoid hera-pheri about authenticity and cut out possible tampering with or breach of security of a confidential document.

The blanket ban on immovable property transactions will kill the hopes and aspirations of the dozens of real estate dealers, who have already committed themselves online. Essentially, these portals will remain 'click and brick' businesses geared to completing all transactions offline, while using the Net only as a channel of information. Will it be worthwhile for the real estate portals to maintain an online presence? For them, the killer app of the Net was the hope of reaching remote markets for their properties. This will no longer be easy.

I presume this exemption was listed to prevent the avoidance of stamp duties. It must, however, be remembered that any property transaction is also a rich source of unofficial revenue for the various government department officials involved in the registration, sale and mutation, and tax-clearance process. That is a consideration that most people will be too polite to bring up when debating the motivations behind this and other exemptions and provisions. But it ought to be borne in mind. If one analyses the IT Act with a bias towards discovering the possible profit motives of government and the people who run it, it appears to be quite an effective document.

Devangshu Datta

Tell us what you think of this column